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NEW YORK (CBS.MW) -- The Dow Jones Industrial Average eked out modest gains Tuesday, as a late surge by Intel helped offset concerns about IBM's accounting probe and deep discounts at General Motors.

And scandal figured prominently on Wall Street again as Martha Stewart's company disclosed that criminal and civil charges against her are expected soon in connection with the ImClone Systems affair. An unconfirmed media report said Stewart plans to step down as chairwoman of Martha Stewart Living Omnimedia
MSO.See full story.

The Dow Jones Industrial Average
DJIA,
+3.15%
rose 25.14 points, or 0.3 percent, to finish the day at 8,922.95, while the Nasdaq Composite
$COMPQ
added 12.81 points, or 0.8 percent, to close at 1,603.56 -- its first close above 1,600 since May 31 2002.

Investors took solace in comments from Alan Greenspan, as the Federal Reserve chairman cited signs of a "fairly marked turnaround" in the U.S. economy since the end of the war in Iraq.

Michael Sheldon, chief market strategist at Spencer Clarke, said the markets are likely to tread water over the next few sessions ahead of the much-anticipated jobs data coming on Friday.

Although Greenspan said the job market has yet to show consistent signs of improvement, economy watchers did get some good news on Tuesday. The number of layoffs by U.S. employers fell 53 percent in May, the lowest level since November 2000, according to outplacement firm Challenger, Gray & Christmas. See full story.

Richard Berner, a Morgan Stanley economist, said he expects a gradual pickup in the nation's economy in the second half thanks to three factors: fiscal stimulus now in place, a decline in market uncertainty and lower energy prices.

"We believe any adjustments to the revenue in question would be limited in size, scope and impact. However, [the] news may not sit well among an investor base previously wary of IBM's disclosure and accounting," commented Banc of America Securities in a research note.

Among other blue-chip stocks on the move, GM
GM,
+4.97%
said sales rose 4 percent in May but it dropped second-quarter production by 200,000 to 1.7 million vehicles due to tornado damage at a plant in Oklahoma City. The company anticipates third-quarter production will be down more than 6 percent from last year's level. See full story.

AT&T
T,
+3.05%
was also a big loser, dropping 1.7 percent to $19.41 after Ma Bell announced plans to spend $500 million to improve customer service.

Among other Dow component stocks, Hewlett-Packard
HPQ,
+5.70%
rose 2 cents after backing its profit and revenue targets for the second half of the year. See full story.

FedEx
FDX,
+2.15%
slumped almost 3 percent after announcing that it would slice up to 14,000 jobs -- or 12 percent of its work force -- in order to slash costs. The cuts are expected to generate annual savings of $150 million to $190 million by 2005.

Power generator Mirant
MIR,
-8.77%
was a big decliner after disclosing late Monday that it would attempt to avoid bankruptcy though a swap of its debt. Mirant also said that it continues to negotiate with lenders to refinance $3.15 billion in bank debt. See full story.

Honeywell upgrade; Cigna slides

Prudential upgraded Dow component Honeywell
HON,
+3.50%
to a "buy" rating from a "hold," indicating that it was encouraged by the company's fire and security businesses. The news sent shares 1.3 percent higher.

Cigna
CI,
+3.50%
stumbled 4.7 percent following a downgrade from UBS Warburg to "neutral" rating from a "buy."

Merrill Lynch lifted its view on Brocade Communications Systems
BRCD
to a "buy" from a "neutral," citing attractive valuation, strong demand and stable pricing as well as a better competitive position vis-à-vis McData and Cisco Systems. The move pushed Brocade shares up more than 20 percent.

Bulls back in Treasurys

Government bonds rallied heartily for the first time in three, with the 10-year Treasury note up 21/32 to yield
$TNX
3.33 percent while the 30-year government bond climbed 31/32 to yield
$TYX
4.37 percent. See Bond Report.

In the currency sector, the U.S. dollar held gains against the euro as investors bet a euro-zone rate cut could be in the offing this week. See full story.

A U.S. Treasury spokesman said both President Bush and Treasury Secretary John Snow support a strong U.S. dollar. Market watchers have been confused about the administration's dollar policy in the wake of remarks from Snow two weeks ago that appeared to back a weaker currency.

In the meantime, the European Central Bank will meet on Thursday to decide on interest rates. Market participants are clamoring for a rate cut -- especially in light of the euro's sharp appreciation, which has rendered European exports more expensive and threatens to further dent an already weak economy. See related story.

August gold closed at $366.30 an ounce, down 80 cents and off the session's intraday low of $364.30. See full story. Oil futures hovered just above $30 per barrel. See full story.

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